Cooper Tire CEO Says Problems With China JV Flagged to Apollo Tyres

WILMINGTON, Del. — Apollo Tyres Ltd. knew what it was getting into when it agreed in June to buy Cooper Tire & Rubber Co., Cooper’s chief executive said Tuesday, lobbing the opening volley in Cooper’s lawsuit seeking to force Apollo to close its $2.2 billion deal to buy Cooper Tire.

Roy Armes, chief executive of Ohio-based Cooper, said on the stand in the Delaware Court of Chancery that Cooper warned India’s Apollo early in their negotiations that Cooper’s Chinese joint venture partner might be a roadblock to the deal getting done. Apollo has cited the backlash from the joint venture — which is refusing to produce Cooper-branded tires or give Cooper updated financial information — as an impediment to completing the deal.

Cooper has essentially said, tough luck, a line its chief executive reiterated on the stand.

“These are risks that we identified up front,” Mr. Armes said.

Cooper is seeking to force Apollo to close the transaction, which would be the largest acquisition of a U.S. company by an Indian one, according to Dealogic.

Apollo wants a reduction to the $35-per-share deal price, to compensate for what it says are disputes with workers over the deal in the U.S. and China, along with worse-than-expected financials at Cooper’s U.S. business. Apollo needs to borrow more than $2.3 billion to close the deal, and has said it can’t market the debt in light of changing circumstances and rising costs.

Apollo says renegotiating a contract with U.S. steelworkers could cost up to $125 million, according to an email exchange made public in court Tuesday, a cost that works out to about $2 per Cooper share. Cooper says it should cost substantially less. Apollo asked for a reduction of about $2.50 per share in late September, which Cooper rejected.

Apollo disputes that it knew of the extent of the problems with the China JV. Its lawyer, Sullivan & Cromwell LLP’s John Hardiman, said Apollo didn’t expect Chengshan’s chairman would “organize a strike, put guards at the door” and refuse to allow Cooper and Apollo access to financials.

Chengshan had flirted with making a bid for Cooper before the Apollo deal was signed, Mr. Armes confirmed Tuesday. Chengshan never made a formal offer, he said. The Cooper CEO acknowledged Tuesday he didn’t tell Apollo of Chengshan’s interest before the Apollo deal was signed up. Mr. Hardiman hinted such information might have changed Apollo’s thinking about the deal.